As the global economy catches its breath, industry leaders are bracing for yet another crisis. Manufacturers are reeling from a shortage of silicon chips — components critical to the manufacture of devices from PCs to pacemakers.
This isn’t the first case of a “chip famine.” There have been several major semiconductor shortages triggered by technological advancements, changes to manufacturing processes, and even natural disasters. What’s alarming about this shortage is that these chips are now used in just about everything.
The shortage is having a massive ripple effect across the tech and auto industries. It’s stoked fears that certain electronics could become difficult to buy because there aren’t enough chips to produce them. Manufacturers and consumers will both feel the pain, though open-source software could provide some relief.
How Lockdown Demand and Preemptive Hoarding Created a Chip Famine
The chip shortage first began back in the spring of 2020. The supply chain was already running at full speed when the COVID-19 pandemic hit. Suddenly, companies all over the world were investing in new technology to make the shift to remote work. At the same time, there was a boom in demand for gaming consoles, laptops, and 5G-enabled smartphones.
Increased demand combined with social-distancing restrictions at manufacturing plants put even more pressure on supply chains. The effects of the chip shortage will be felt across nearly every sector, but the auto industry has taken the biggest hit so far.
Back in the spring, many car dealerships and showrooms closed, which put a dent in sales. Automakers scaled back their chip orders, and semiconductor manufacturers reduced production.
Demand for new cars has returned, but chip manufacturers are fulfilling other orders. And the auto industry is too small to compete with the behemoth that is the tech industry. Since December, many automakers have either reduced output or halted production due to a lack of components.
The pandemic alone could have been enough to create a shortage, but preemptive hoarding exacerbated the problem. In response to U.S. sanctions in 2020, Chinese tech giant Huawei began hoarding chips to power China’s 5G rollout. To protect their own supply, Apple also began stockpiling components.
Still, Apple claims that shortages hurt sales of the iPhone 12, and it’s not the only tech manufacturer affected. Nintendo, Sony, and Microsoft have blamed the component shortage for manufacturing bottlenecks.
The Shortage Could Derail the Internet of Things
While the silicon shortage means it might be harder to get a PlayStation 5, the problem is much more widespread. These chips are crucial components in everything from airplanes to HVAC systems.
One area of tech that could take a huge hit are the devices that make up the Internet of Things (IoT). In its 2019 semiconductor industry report, KPMG ranked the IoT as the top driver of revenue — even surpassing wireless communication.
The IoT is a broad category of technology encompassing everything from smart appliances to self-driving cars. The convergence of artificial intelligence and 5G will kick off a massive surge in IoT growth.
But the escalating chip shortage could pose a major threat to the IoT. For one thing, the IoT is going to require much greater diversity in chip designs than any other industry. Smartphone manufacturers can use the same design for hundreds of millions of devices. Other smart devices have a variety of different requirements.
These issues will be exacerbated by the inevitable consolidation among manufacturers. Already consumers are frustrated by compatibility issues with their connected devices. Last year, Google announced that it would no longer allow people to control Nest products via other smartphone applications. Other device manufacturers are bound to adopt similar policies as they jockey for smart-home domination.
Without some prevailing industry standards, consumers will be the ones who suffer. Users will be forced to retire unsupported devices and purchase new hardware that’s compatible with their preferred system. This is the absolute worst-case scenario, which would undoubtedly worsen the silicon shortage.
Open-Source Software Could Provide Some Relief
An open-source, silicon-to-service framework could be the shock-absorber the industry needs. It would allow consumers to mix and match smart-home devices and add WiFi access points without retiring existing hardware. And it would allow service providers to add new WiFi infrastructure and seamlessly upgrade existing gateways and access points, in any home running on the framework.
Fortunately, some companies have started using OpenSync — open-source software that connects in-home hardware to the cloud. OpenSync is the fastest-growing system of its kind to support the curation, delivery, and management of home connectivity services. Most remarkably, it is cloud-agnostic, silicon-agnostic, and CPE-agnostic.
OpenSync was developed as a joint initiative between adaptive WiFi pioneer Plume and Samsung. Telecom giants Comcast, Bell Canada, and Liberty Global have all thrown their support behind OpenSync, and it makes sense.
An open-source framework is a win-win for all stakeholders involved. It allows Communications Service Providers to curate and support third-party services for their customers. It allows device manufacturers to use current and legacy chipsets. And it allows developers to push updated software to older devices.
But there’s one powerful feature of OpenSync that could really cushion the blow of the silicon shortage: All OpenSync-powered CPEs (routers, modems, and access points) can coexist on the same network. This extends the longevity of hardware that would otherwise be rendered obsolete with the next generation of WiFi. As long as their access points are OpenSync-enabled, homeowners can add new access points to their OpenSync-enabled network without replacing old hardware.
The silicon chip shortage of 2021 is unlike any chip famine we’ve ever experienced. We’re more dependent on these components now than ever, and it’s happening at the convergence of AI, 5G, and IoT. As pandemic restrictions loosen, chip manufacturers will ramp up production, but manufacturing bottlenecks will likely persist through 2021 and beyond.
Open-source software may dampen the blow of the silicon shortage, but it’s one solution to a multifaceted problem. Until supply can catch up to industry demands, consumers should brace for sticker shock.